Guide 9.3
Advanced, 7 min read. Checked with Scalpel 1.12.8 on .
In short
Scalpel reads the short side live: whether any shares are left to borrow (IBKR's shortable data), what shorts pay to borrow them (IBKR's stock-loan file), the Reg SHO threshold list and FINRA short volume, scored into a 0 to 100 borrow pressure. The chips are Can't short (no shares left), Short fee 85% (a borrow fee of 20% a year or more) and Hard to short (few shares to borrow). For a long, it means this: when borrow is gone and the fee is climbing, no new shorts can pile on, and a push through VWAP or the high of day has forced buyers behind it.
Scalpel is long only (guide 7.3), but the short side still matters to your long. Short sellers are future buyers: every share sold short has to be bought back. When they cannot add, and holding the position costs them a fortune, a run through a level they defended can force them to buy at the same moment you want to sell into strength. That is a short squeeze. This guide explains where Scalpel's borrow data comes from, what the chips and the score mean, and how far to trust them.
Before you start
All free, all through what you already have:
| Source | What it gives | How fresh |
|---|---|---|
| IBKR shortable data, on your quotes | Whether shares can be borrowed (easy, locate needed, or none) and how many are left | Live, for symbols on your desks and the IBKR scanner's list |
| IBKR's public stock-loan file | The annual borrow fee and the shares available, for every US stock | IBKR updates it about every 30 minutes; Scalpel fetches it every 15 |
| Nasdaq Reg SHO threshold list | Stocks with persistent fails to deliver, a sign of heavy shorting | Daily |
| FINRA daily short volume | The share of yesterday's volume that was short selling | Daily |
| FINRA short interest | The total short position, twice a month (guide 8.4) | Up to about three weeks old |
IBKR's shortable reading has three levels: easy (at least 1,000 shares to borrow), locate needed (shortable only if the broker can find shares), and none.
A stock gets one borrow chip, the strongest that applies:
| Chip | When | What it means for a long |
|---|---|---|
| Can't short | No shares left to borrow | Shorts are trapped: they cannot add, and a push through VWAP or the high can force them to buy |
| Short fee 85% | The borrow fee is 20% a year or more (the number is the fee) | Shorting is expensive. Every day short costs them, which is squeeze fuel |
| Hard to short | Locate needed: few shares to borrow | Some squeeze fuel |
No chip means borrow is easy and cheap, or nothing is known yet. The chip is violet, Scalpel's squeeze colour, on scan rows and in the desk's intel strip, where the strip's summary is the verdict below.
Behind the chip, Scalpel scores how trapped the shorts are, 0 to 100:
| Ingredient | Weight | Scoring |
|---|---|---|
| Borrow fee | 25% | Zero at 1% a year or less, full at 100% or more, on a log scale |
| Shares left to short | 25% | Full when none are left; 70% when a locate is needed; 60% when under 50,000 shares are left |
| Borrow used up today | 15% | How much of this session's first availability reading is gone. 80% used up scores full |
| Fee rising since yesterday | 10% | Counts when the fee is 5% or more and up on yesterday's. A doubling scores full |
| Reg SHO threshold list | 10% | Full when the stock is on it |
| Crowding | 10% | Short interest (30% of shares out scores full) and days to cover (5 days scores full), averaged |
| Short volume | 5% | Zero at half of yesterday's volume, full at 80% |
Like the squeeze score, it averages the ingredients it knows, but with a floor, so one lonely reading cannot max it out.
| Score | Card title | Means |
|---|---|---|
| 60 to 100 | Shorts trapped | Shorts cannot add and are paying to stay in. A push through VWAP or the high can force them to buy (squeeze) |
| 30 to 59 | Squeeze fuel building | Shorting is getting hard and expensive. Some squeeze fuel |
| 0 to 29 | Shorts not trapped | Shorts can still add freely. No squeeze edge here |
PQRS opened with 120,000 shares available to borrow. By mid-morning there are none. The borrow fee is 85% a year, up from 40% yesterday. FINRA has 18% of shares out sold short with 3.4 days to cover, and 62% of yesterday's volume was short selling. It is not on the threshold list.
| Ingredient | Reading | Points |
|---|---|---|
| Shares left | None | 25.0 of 25 |
| Fee | 85% | 24.1 of 25 |
| Used up today | All 120,000 | 15.0 of 15 |
| Fee rising | 40% to 85%, more than double | 10.0 of 10 |
| Crowding | 18% and 3.4 days | 6.4 of 10 |
| Short volume | 62% | 2.0 of 5 |
That is 82.5 points out of the 90 that apply (the threshold list is left out), so the score is 82.5 / 90 = 92: Shorts trapped.
The last line of the card, "Borrow pressure 92 of 100", is this score. A short interest reason names its base: "of the float" when Scalpel knows the float, otherwise "of shares outstanding". It feeds the stock's overall SQZ score on the scan panel with a 20% weight (guide 8.4).
When a stock you are watching runs out of borrow during the session (IBKR's shortable reading drops to none), Scalpel raises a toast, for example PQRS: no shares left to short, with a sound. It fires once per stock per day.